Dear President Anderson and Honorable Members of the City Council:
I am pleased to present the Fiscal Year (FY) 2020 budget to the Woburn City Council for review and approval. The General Fund budget will increase 4.7 percent, and the water and sewer budget will increase 6.1 percent. The grand total FY 2020 budget is $156,770,196
I have prepared a lean budget primarily funded by the tax levy and water and sewer fees. Funding also comes from locally generated receipts, State Aide and Chapter 70 school funding. This year we anticipate net local aide and Chapter 70 funding to slightly exceed last year’s numbers. We continue to use conservative estimates for locally generated receipts. We are forecasting continued, steady new tax growth in our residential and commercial tax base, which reflects completed construction as of December 31, 2018. The City side of the budget represents a level service budget. As always, our City employees continue to provide a high level of service to residents and taxpayers.
We will continue to focus collaboratively on maintaining and improving our strong financial position. Our commitment to conservative budgeting and spending and the implementation of a number of operational best practices are the foundation that continues to strengthen our financial position and retain our solid Aa1 Moody’s bond rating. Our excellent bond rating—the second highest rating assigned by Moody’s—has helped save taxpayers substantial money as we borrow funds to pay for critical infrastructure projects including, the Hurld Wyman Elementary School, the Woburn Public Library, and the relining and replacement of City water mains and sewer lines.
At the same time, we have continued to increase our reserves and unreserved fund balance. Conversely, GASB 43 & 45 reporting requirements pose a significant threat to all city and town balance sheets.
These government accounting standards now require all cities and towns to report retiree insurance costs—as they are incurred and not when the employee retires. We have started to address this monumental expense with the creation of an OPEB trust, which has accumulated more than $6 million through appropriations and investments during my administration.
In addition, the City Council approved my proposal allowing the City to further reduce our significant OPEB obligations via a reasonable increase in retiree health insurance contributions for those employees retiring after December 31, 2019, that brings the City better in line with rising health care costs as well as average contributions across the state.
The FY 2020 general fund budget will increase by approximately $6.2 million. The budget is being driven by increases in school funding, labor and salary obligations, Medicare taxes, trash and recycling costs, maturing debt, staffing and maintenance needs at the new library, and pensions.
The larger-than-planned increase in the FY 2020 budget is being driven in part, by an unanticipated spike in the Woburn school budget. Inaccurate budgeting, updating and verification of steadily increasing out-of-district special education costs over a number of years have led to a significant budgetary shortage, which can no longer be covered by the circuit breaker or other school funds.
Over the past six years we have worked collaboratively to provide our schools with annual budget increases averaging more than 4 percent per year, and far in excess of State Net School Spending requirements. This year, the school budget is increasing by 5.5 percent, or $3.4 million, as well as another $200,000 increase in our regional school district assessments.
Our past and continued commitment to solid school funding has helped Superintendent Matthew Crowley and the School Committee create a solid three- to five-year educational plan with a number of important initiatives that support teachers and students, as we continue raising the bar together:
- Adding adjustment counselors at each of our 10 schools to help meet the growing social and emotional needs of all our students.
- The addition of curriculum leaders to support the alignment of our pre-K through 12 curricula to ensure our students are prepared when they leave the Woburn Public Schools.
- Funding increase at the elementary level to support having music and art every week, which will also allow for more collaboration and professional development for teachers.
- The creation of a Human Resource Department to actively recruit talented educators, and support our staff needs.
Although the additional funds do not represent a sustainable annual increase, I fully support this funding amount because it is necessary to properly and swiftly address the unanticipated budgetary shortfall so that our school district continues its forward momentum. In addition, I will be requesting the City Council and School Committee accept legislation allowing the City to create a “Special Education Stabilization Fund” to address extraordinary out-of-district tuition bills that may occur during the year. Upon your acceptance, I will forward an appropriation request of $500,000, as a first installment for the new fund.
We have successfully settled three-year labor contracts with all unions, except the Police Superiors and Library, covering fiscal years 19, 20 and 21. The settlements include a wage pattern increase of 2 percent per year for three years for all labor groups. Copies of all settled contracts are public record, and are available at the office of the City Clerk.
The budget includes $1.2 million to fund the first two years of salary and wage increases for city employees. There is also a $100,000 increase in the Medicare line item, which will be used to pay increased Medicare taxes on higher wages.
We continue to incorporate planned increases for new debt in accordance with our five-year capital plan. Last year, we bonded just under $12 million for the new Hurld Wyman Elementary School and the chiller at the O’Brien Ice Rink. The combined principal and interest payments for debt service increased by $1,100,000, totaling $6.1 million, and represents less than 4.5 percent of general fund spending. In addition, we issued a $6 million one-year bond anticipation note for the Woburn Public Library, due this September. Looking forward to FY 2021, we have planned final borrowing for Clapp Park, The Hurld Wyman Elementary School and the aforementioned Woburn Public Library.
We are in year two of our three-year contract for trash and recycling pickup with Waste management. The appropriation required for FY 20 increased by $180,000 (5%) over last year. The renewal increase is being driven by the collapse in the price of recycling materials, which is severely impacted by the national sword policy in China limiting the use of recyclables. We will continue to monitor and explore different avenues to address this impact over the next two years.
The budget for the Woburn Public Library will increase by $285,000 as we make good on our commitment to provide a world class library to the citizens of Woburn. We have increased the maintenance budget by $120,000, which is reflective of the funding needs of a more spacious library as well as technological advancements. The library budget includes $140,000 to fully fund all positions, which were approved and partially funded in FY 19. The budget also fully funds three part-time positions created just prior to the grand opening in March. And, finally, $25,000 has been included to fund a “spare pool” to ensure the library remains open on Saturdays.
As I advised the City Council last year, increases in our pension funding obligations will continue to have an impact on our budget. In the two fiscal years prior to FY 20, the combined City obligation for funding pensions increased by more than $2 million.
The pension appropriation for FY 20 represents an increase of $330,000 over last year, and includes estimated costs to fund the first year of a request to increase wages subject to an annual COLA increase—from $12,000 to $18,000. I am against this request. We should be looking at pension reform at this time, not additions to our pension obligations. This proposal, if approved by the City Council, will add a minimum of $4.5 million to outstanding pension obligations, and must be paid over the next 16 years.
As I stressed at a recent City Council committee meeting, given the approximate additional annual cost ($281,250), this proposal should not be approved, particularly considering the financial challenges and realities the City already faces in this budget cycle.
On the positive side, we received a slight decrease in our health insurance rate renewal with MIIA, passing the savings onto employees and city taxpayers.
The water and sewer budget will increase by 6.1 percent ($1.1 million). This increase is attributed to debt service payments for water system improvements, including the relining of aged city water lines and mains. We also experienced a $900,000 increase from the MWRA for water they supply to the City. In addition to the 3-percent rate increase assessed by the MWRA, our MWRA water usage increased significantly due to a burst pipe and equipment damages resulting in an extended shutdown of our own water treatment plant, which prevented the City from producing our own water during that time period. The City is actively pursuing reimbursement for our costs through an insurance claim.
I will be submitting the updated capital budget to the City Council at your June 4, 2019 meeting. I look forward to discussing both budgets during your committee meetings.
Scott D. Galvin
Cc: City Clerk William Campbell
Click on the link below to view Mayor Galvin’s FY2020 Budget